Local Connection Issues

KEY LEARNING POINTS

It is up to councils to decide if they want to include ‘local connection’ criteria

A local connection should not be treated as a test of eligibility to join a Register; its main purpose is to help inform the priority by which sites might be allocated

Councils should avoid setting local connection criteria that are overly restrictive as this may infringe EU law

Local connection considerations can be applied differently in different circumstances; for example when disposing of land, considering planning applications on exception sites, and in the context of affordable housing

A points-based system is useful but should not be over-complicated

Introduction

For some local authorities it will be important to take into account a private homebuilder’s links to the area. Councils may find it helpful to record ‘local connection’ when they assess demand, and also when they allocate plots to people on their Register.

DEFINING LOCAL CONNECTION

Section 199 of the Housing Act 1996 defines ‘local connection’ as a situation where someone has a connection because of: –

normal residence (current or previous)

employment

family connections, or

special circumstances

It is up to individual councils to decide if they want to apply local connection considerations. There is currently no national obligation to do so.
However, if a council wants to introduce a local connection for private homebuilding (in the context of its affordable housing policy) the Government’s statutory guidance on ‘Providing social housing for local people’ (DCLG, December 2013) and ‘Allocation of accommodation’ (DCLG, June 2012) will apply.

About

This is one of many Briefing Notes that explain resourcing, planning, land, finance, demand, marketing, consumer support and various technical issues. To see the full range of guidance click here.

Definitions

For the purposes of this Toolkit we have made the following definitions:

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‘self and custom built homes’ are properties commissioned by people from a builder, contractor or package company (this is known as ‘custom build’ housing). When people physically build themselves, sometimes with help from subcontractors, this is known as ‘self build’ housing. We call all these people ‘private homebuilders’.

‘serviced building plots’ are shovel-ready parcels of land with planning permission, laid out and ready for construction with access and utilities/services provided to the plot boundary. Some private homebuilders just purchase a plot; others opt for a ‘shell’ home (that they then finish off), or they select from an extensive menu of options offered by developers/builders.

‘group projects’ mean homes built by private homebuilders who work as a collective.

Statutory definitions are provided in section 9 of the Housing and Planning Act 2016 which amends the Self-build and Custom Housebuilding Act 2015.

NOTE

This Briefing Note will be revised when the Regulations to support the commencement of the Self-build and Custom Housebuilding Act 2015 and the Government’s Right to Build policy are finalised.

THE RIGHT TO BUILD AND LOCAL CONNECTION TESTS

The Government’s consultation on the ‘Right to Build: Supporting Custom and Self Build’ (DCLG, October 2014) flagged up the possibility of introducing a local connection test when private homebuilders apply to join a Register.
The following local connection criteria were suggested: –

Residency in the area for a specified time period (for example a minimum of 12 months). The time period could be determined by a council, but should not be too onerous. The consultation also suggested and it should make allowances for people that have lived in an area for a long time (but have had moved away for a short period prior to registration), for example for work or study purposes

Close family connection to the area (for example parents or children), as determined by a council

Members of the armed forces would be exempt

The Government’s response to the consultation in March 2015 acknowledged that there was strong support from local authorities for some sort of local connection test, but it felt that councils should have local flexibility about how and whether to apply this.
Many councils suggested that a local connection would be more helpful in determining the priority by which plots might be made available. Residency, family, work connection and involvement in the local community were all supported as suitable criteria. Responses were more mixed on the appropriate length of time a person should be resident in an area, and the proposed exemption for members of the armed forces.
The Government is currently preparing legislation to support the commencement of the Self-build and Custom Housebuilding Act 2015. This may make provision for local connection considerations, both in the preparation of Registers and the requirement for councils to ensure that there are sufficient serviced permissioned plots to meet local demand on their Register on an on-going basis, as set out in the new draft legislation in the Housing and Planning Bill.

APPLYING LOCAL CONNECTION CONSIDERATIONS

If councils want to apply a local connection this will always be a local decision, taking account of an area’s housing market pressures, demographic considerations, the level and type of demand and wider council objectives.
For example, Stoke on Trent City Council wants to attract inward investment by creating higher value plots suitable for executive housing. At the other extreme the Exmoor National Park Authority recognises that many people with strong local connections cannot find a home in their community as house prices and rents are high. To address this, the authority has adopted planning policies to help deliver private homebuilding opportunities for local people under its affordable housing policies.
It is also important for councils to recognise that housing markets don’t always respect local authority boundaries and that people may have connections with more than one borough.
There are two circumstances when a local connection might be taken into account: –

When people Register – a local connection could be a key eligibility hurdle people have to clear to enable them to register in the first place

When any land or plots are allocated – for example when a council is considering planning applications for exception sites, it may want to prioritise the plots for people on the Register that have a bona fide local connection

Unless the Government introduces new rules that restrict access to local Registers, councils should not stop certain people from applying to join a Register, as this will distort any assessment of local demand. It will also be resource intensive to monitor.
On balance we believe Registers should include specific questions about links to the local area, such as whether someone has lived there for a period of time, whether they work there, or have close members of their family living or working in the area. This will provide councils with a more refined picture of local demand, and it will help them develop informed local policies and actions. Our Briefing Note onRegisters and assessing demand provides further advice on local demand assessments and the role of Registers.
The more important role for a ‘local connection’ is when councils dispose of plots to people on their Register, particularly where sites come forward under local exception policies. For any sites that involve affordable housing, as defined in the National Planning Policy Framework, then determining a local connection will also be vital.
Councils will also want to have regard to their duties under the Equality Act 2010 and under other relevant legislation.

TOP TIP

Ask about local connection

Registers should include questions about local connection, so that councils have the flexibility to allocate land or plots that may become available to local people. However access to Registers should not be restricted to just those people that have a local connection

LOCAL APPROACHES VARY

Existing practices vary widely and there is no one-size-fits-all approach. Five different approaches are highlighted below.
Shropshire Council has set out a local connection test through its Local Plan for the council’s ‘Build your own affordable home’ programme. This enables private homebuilders to construct affordable housing under the council’s affordable housing policies. To be able to build on an exception site private homebuilders must demonstrate that at least one adult member of the applicants’ household meets at least two of the following criteria: –

Had a permanent residence in the local area for any period of five years as a child attending a local school

Has previously lived in the area at some point for 15 continuous years as an adult

Is currently employed or routinely carries out self-employed work within either the local area or five kilometers of the site

Can demonstrate active community involvement in the local area sustained for at least the previous two years

Dartmoor National Park requires applicants who want to join an affordable housing private homebuilding scheme to show that a member of the household meets the following criteria: –

Is currently resident in Dartmoor and has been for the last five years

Is currently employed in Dartmoor

Has lived in Dartmoor previously for at least five years, and moved away within the last three years

Has some other strong local connection with Dartmoor, for example by upbringing or family ties

Eden District Council has a similar approach (see the Council’s Housing Supplementary Planning Document, November 2010).
Plymouth City Council takes into account a local connection when deciding who is eligible to purchase any plots it makes available. The city uses a local weighting system that is based on the following: –

Residents that have lived within one kilometre or within the same ward area as the site for three years receive a weighting of 1.3

A resident that has lived in the wider Plymouth City Council area receives a weighting of 1.2

Residents who are listed on the council’s demand Register for at least three months receive a weighting of 1.1

For example bids for a plot with a guide price of £45,000 will be weighted by the council as follows:
Petersfield’s Draft Neighbourhood Plan encourages private homebuilding on two allocated sites, and restricts the ownership of plots on these to individuals with a local connection (see box below). This policy has been successfully tested at Examination.

TOP TIP

Points based systems

Think about the circumstances in which local connection test should be applied and consider if a points-based or weighting system is appropriate

PETERSFIELD’S DRAFT NEIGHBOURHOOD PLAN (2015)

Policy HP7 considers ‘local connection’ to be either being by residency or by employment and defined as follows:
a. Residency Qualification

Have been resident in Petersfield or a qualifying parish for 12 continuous months at the time of application or

Have lived in Petersfield or a qualifying parish for three out of previous five years or

Have close family (mother, father, brother or sister, adult children or grandparent) who have been resident for five continuous years and continue to be resident in Petersfield or a qualifying parish

b. Employment Qualification
An individual will be considered to have a local connection if he/she or his/her partner is in employment, and meets all of the following criteria:

The office or business establishment at which a person is based or from where their work is managed is within Petersfield or a qualifying parish and

Is in paid employment and

Works a minimum of 16 hours per week and

Has been employed for a minimum of 12 continuous months at the time of their application and is currently in employment and

TOP TIP

Advice on connection criteria

Provide advice on potential connection criteria when local communities prepare neighbourhood plans, as it may be something they will wish to consider

INTERNATIONAL EXPERIENCE

Other countries – particularly Germany – make good use of local connection criteria, especially when allocating land to private homebuilders.
Here are five examples:
Breitbrunn Council applies five main criteria when disposing of plots, which it offers at a 30% discount. To be eligible to buy applicants need to show that they: –

Have lived in local area for at least five years

Don’t own another plot of land in the area (whether freehold or leasehold)

Have an average annual family income over three years that does not exceed €45,000 plus an additional €7,000 per child for single parents (couples are allowed an average household income of €90,000)

Have total assets that do not exceed the plot price they are applying to purchase

Have one child under 18 years of age

Severely disabled or family members requiring care are given priority and the council can give an exemption under the residency rule if other criteria are met.
Berg District Council in Bavaria has developed a sophisticated points-based system that includes points for the number of children in a household, and whether an applicant is a key worker etc.
Maisach Council’s points-based local connection model is well-known in Germany and is applied when allocating plots for local people under its Securing building land for local people programme (‘Baulandsicherung für Einheimische’).
Poing Council is currently releasing 31 discounted plots as part of the ‘Seewinkel’ housing project outside Munich. Plots with an average price of €476 per sq m (£170,000 for a 500 sq m plot) are being sold using a connection test designed to prioritise local families. The council’s approach has been popular, and it received almost 130 applications for the 31 plots. This is because private property prices in the local area range between €900-1200 per sq m, which are out of reach of many local people.
Pastetten Council is taking a similar approach to address local affordability challenges with plot prices in the local area ranging from €360-380 per sq m. The council has acquired part of a site and is selling 22 plots by using graded connection criteria as follows: –

Twelve plots are sold at €160 per sq m (£57,000 for a 500 sq m plot, excluding service costs) with full local connection restrictions

Five plots are sold at €260 per sq m (£92,500 for a 500 sq m plot, excluding service costs) with local connection ‘light’ restrictions, allowing the resale of a property in a shorter time period

Five plots are sold above market value at €370-395 per sq m (£132,000-£140,000 for a 500 sq m plot, excluding service costs) with no local connection restrictions

Aschheim Council also applies local connection criteria, and offers a package whereby it sells the plot and builds the house for the applicants. This option is particularly attractive where terraced or semi-detached properties are preferred, and it also speeds up site development. This approach was used in Brauneckstraße where the council released seven small plots at affordable prices and commissioned a local affordable housing provider to construct the terrace for the successful applicants. Development in Brauneckstraße started in May 2011 and was completed by February 2012, with the owners having optional fit out choices. By keeping the plots small the council was able to offer spacious well-constructed energy efficient owner-occupied homes quickly at reduced prices (£175,000-£282,000 for 120 sq m terraced homes on plots of 220-350 sq m).
New terraced owner occupied properties in Brauneckstraße developed for local people by the council in association with an affordable housing provider (München-Land GmbH)
Local Connection Issues have been tested in the European courts, summarised in the boxed text below:

EU JUDGEMENT OF 8 MAY 2013

The EU Judgement of 8 May 2013 (ECJ joined cases C-197/11 and C-203/11) held that a Flemish Decree in Belgium which required a ‘sufficient connection’ between the prospective buyer of immovable property and the target commune is an unjustified restriction on fundamental freedoms and contrary to EU law.
The Decree of the Flemish Region of 27 March 2009 on land and real estate policy linked the transfer of immovable property in certain Flemish communes to the condition that there is sufficient connection between the prospective buyer or tenant and the relevant commune. The decree also imposed an obligation on non-public sector plot enablers (sub-dividers) and developers and those who deliver social housing units and provided for tax incentives and public subsidy such as reduced VAT and stamp duty on housing sales and purchase of land, as well as a purchase guarantee and infrastructure subsidies. The Flemish Government claimed that the condition of a ‘sufficient connection’ was justified, inter alia, by the objective of responding to the housing needs of the less affluent local population in the target communes.
The Flemish Decree set out three conditions in which connection could be demonstrated: –

a person to whom the immovable property is to be transferred has been resident in the target commune for at least six years prior to the transfer, or

the prospective buyer or tenant must, at the date of the transfer, carry out activities in the commune in question, or

the prospective buyer or tenant must have a professional, family, social or economic connection with the commune in question as a result of a significant circumstance of long duration

The Court held that the approach taken in Flanders restricts the fundamental freedoms of EU citizens (including the free movement of capital) but the local connection model, including subsidies that are not State Aid, may be appropriate. However these must be justified to be in the public interest to guarantee sufficient housing for low-income or otherwise disadvantaged sections of the local population. Any criteria used to determine local connection must be necessary, appropriate and relative. Public Works Contracts with investors/private sector partners that require the provision of land and buildings for disposal to local communities at capped or discounted prices are also affected by the judgement.
The Association of Bavarian Councils in Germany has subsequently issued Guidance (November 2014) to local councils to make sure they are clear that their local connection model is legally enforceable, while not conflicting with EU law. It advises that local connection policies should cover the following: –

Time limits for living locally should not exceed five years

Family income should not exceed €90,000 per annum (plus €7,000 child maintenance allowances), which is halved for single parents

Family assets should not exceed the cost of the plot (people who own local developable land must be excluded)

Use of local selection criteria following a points system restricted to social considerations (income, children and care for disabled) is recommended but points for community or public service engagement should be avoided

TOP TIP

Advice on connection criteria

Provide advice on potential connection criteria when local communities prepare Neighbourhood Plans, as it may be something they will wish to consider

TOP TIP

Be aware of EU law

Consider local connection carefully, and don’t introduce a local connection test which is too restrictive, as this may not comply with EU law

SUGGESTED CRITERIA FOR UK COUNCILS

In the absence of UK guidance or legislation, councils may want to consider the following for a local connection test when allocating plots for local people: –

A requirement for the private homebuilder to have resided in the area for a specified time period – a reasonable period might be at least two years, but no longer than five years

Consider whether a common approach across several neighbouring councils is appropriate – especially where a housing market area spans a number of districts

Avoid any criteria that might prevent younger people moving into the area to take up work or apprenticeship opportunities

Give preference to people in urgent housing need and families with a low income (including people on the housing waiting list), particularly young families with children

Consider exemptions for members of the Armed and Reserve Forces (and former service personnel within five years of discharge), including bereaved spouses and civil partners

Take the financial status and the assets of a private homebuilder into account, particularly land or property owned in the area

Consider: –

Family association (close family living in area for a number of years)

Families with children enrolled at a local school in the area

Employment for a certain period of time

Priority for people with disability and families with children.

Further Reading

The following Case Studies offer useful insight into the issues discussed in this Briefing Note:

CREDITS

The NaCSBA Research & Development Programme is funded by the Nationwide Foundation and aims to promote the self-build and custom build sector as an affordable route into housing for a greater number of people in the UK.For further information, please visit:www.nacsba.org.uk or www.selfbuildportal.org.uk